IPO News Desk

Priced to Sell: Pricing Weakness Leaves Room for Gains

Ferrari’s IPO was greeted with a great deal
of fanfare, but in the end the car maker’s shares only rose 5.8%
in first-day trading. While not a terrible opening, expectations
were higher for a company with Ferrari’s name recognition. One
reason for the slight first-day gain is that the company priced
its shares at $52, the second highest initial price for an IPO
this year. Arguably, there was less room for appreciation of the
stock’s value given the high starting point.

IPO Pricing - Ferrari’s high per share price
was within the stated range, which makes it somewhat unusual
among recent IPOs. Since the start of September, 61.5% of
companies that have gone public have priced below the minimum of
their stated price range. Only two deals in that period priced
above the maximum stated filing price.

Recent weakness in pricing follows a slowdown brought on by
volatility in the stock market in August. With the increase in
deals priced below the stated range, the year-to-date total of
pricings below the minimum filing price has risen to 30.5% of
all IPOs. That falls short of 2014, when 36.5% of IPOs
priced below the minimum of the stated range, but is more than
2013’s 26.6% total.

Only four companies have gone public this year at a per share
price in excess of $40, and all four are non-U.S. issuers. The
highest IPO sale price this year was $68.56 per share for
Celyad S.A. in June. Ferrari’s $52 price tag
was the second highest, followed by Galapagos N.V.
($42.05) and Cellectis S.A. ($41.50). Celyad
dropped 20.4% on its first trading day, and Cellectis’s shares
fell 5.3%. Galapagos fared the best, posting a 20.1% gain at the
end of its first trading day.

First Day Movement - In
general, IPOs completed between January 1st and
October 22nd have started off well, with 92 new
issues having gained at least 1% in value on their first trading
day. Seven of the year’s IPO companies saw their shares remain
flat on initial trading day, while the shares of 36
issuers lost value on the first day.

The top first-day gainer in 2015 is
Seres Therapeutics, whose shares jumped 185.6% on their
first trading day. Aduro Biotech posted the
second largest gain by climbing 147.1% from $17 to $42 on its
initial trading day. At +118.6%, Shake Shack
enjoyed the third largest first-day gain of the year so far.
Spark Therapeutics and Global Blood
Therapeutics are the only other new issuers whose
shares at least doubled in value on their first day. Shares
of Axovant Sciences came close, enjoying a
99.3% first-day gain.

Companies whose shares dropped in value
on the initial trading day have not fared too badly, with only
13 having fallen 10% or more. The largest first-day loss was a
27.4% drop by vTv Therapeutics in July.
Bellerophon Therapeutics’ shares dropped 25.3% on
their initial trading day, while shares of Sunrun fell 23.1%.

Post First-Day Performance -
Since its impressive first-day gain, Seres Therapeutics has slid
backwards, posting a 59.6% gain through October 22nd.
The year’s top performing IPO through that date is Spark
Therapeutics, whose shares have risen 156.3%. Global Blood
Therapeutics (+125.3%) and ShakeShack (+104.2%) are the only
other companies whose share value has more than doubled.
Overall, 48 companies that have made their market debuts this
year have increased at least 1% in value since they began
trading.

Despite getting off to the second fastest start of
the year, shares of Aduro Biotech have headed in the wrong
direction. After a 147% first-day gain, Aduro's shares traded 38.4%
above the IPO price as of October 22nd. On the other
side of the spectrum is Inotek Pharmaceuticals,
whose shares finished their first day (February 18th)
with no gain, but as of October 22nd had risen 64.74%
above their debut price.

Of all of the IPO companies that have debuted
this year, Bellerophon Therapeutics and Zosano Pharma
have struggled the most in aftermarket trading. The largest loss
so far this year is Bellerophon’s 75.7% drop in share price. Zosano's
shares have fared only slightly better, dropping 73.8%
since their January 27th debut.